TOKYO— Sony Corp. said it would issue new shares for the first time since 1989, part of a $3.6 billion capital-raising plan that highlighted the potential of its fast-growing sensor business but left some investors nervous. The Japanese entertainment and electronics giant said it would raise ¥322 billion ($2.63 billion) by offering new shares and ¥120 billion by selling convertible bonds.Sony said much of the proceeds will be spent to raise production capacity for image sensors used in smartphones, including AppleInc.’s iPhone and Samsung Electronic Co.’s Galaxy.Sony is a front-runner in the image sensor business, boasting a technological edge that is at least a few years ahead of its competitors, including Samsung and OmniVision Technologies Inc. But it suffers from capacity constraints in trying to meet soaring demand, especially from China, where shipments of affordable handsets are expected to grow further.Chief Executive Kazuo Hirai said in April that, with the restructuring largely complete, Sony would embark on an aggressive investment campaign to generate growth. Sony has set a target of ¥500 billion in operating profit by fiscal 2017, with a return-on-equity ratio of more than 10%.The company is ramping up investment in its best earners—devices, videogames, movies and music. Mr. Hirai has said it won’t rule out exiting the television and smartphone businesses, as it did the personal computers last year.Write to Takashi Mochizuki at takashi.mochizuki@wsj.comAt Reuters

Sony had previously flagged smaller-scale commitments to expand in sensors. It said in April that it would spend 45 billion yen to bolster sensor production capacity this fiscal year, on top of a 105 billion yen investment announced in February.

A Sony executive recently told Reuters that demand for sensors was now so strong that it was struggling to keep up.